HMRC wins IR35: BBC contractor deemed to be employee

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BBC newsreader Christa Ackroyd has lost a case against HM Revenue & Customs (HMRC) which considered her an employee rather than a contractor for tax purposes. The case concerned the operation of IR35, the legislation which deems individuals to be employees for tax purposes if they are working via a limited company and but for that company would be an employee of the business/organisation they are providing services to.

This is the first such case that has been held following the changes effective 6 April 2017 to the operation of IR35 where a worker provides services to public sector bodies (such as the BBC), although in the present case the working relationship ceased before the new legislation was effective. A summary of the new rules can be found in our taxation briefing.

This case demonstrates increasing HMRC activity in the area of employment status generally, particularly in light of high profile employment law cases regarding workers in the ‘gig economy’ and the Taylor Review of Modern Working Practices.

Businesses and organisations engaging with non-payroll workers are strongly advised to review their arrangements with those contractors to manage the tax, legal and reputational risks associated with incorrectly treating employees as contractors.